Japan's core machinery orders were expected to post a modest -2.6% drop. Instead they had a worse collapse than anything seen in the aftermath of the Fukushima disaster, plunging by a stunning 14.8% . And the kick in the groin cherry on top was the current account surplus plunged by 62.6%: consensus forecast: -14.5%. The Japanese economy has once again ground to a halt, only this time it has no earthquake or nuclear explosion to blame. This time it is the entire world's fault, where demand has collapsed proportionately. As a reminder the BOJ expanded its QE yet again on April 27. Must be time for another QE because this time will certainly be different after more than 30 years of failures. It is time for those brilliant central planners Ph.D's to do engage in more of the same insanity that Einstein warned about decades ago. And incidentally this is not a joke: on Thursday the BOJ is expected to ease yet again. As a reminder, the BOJ already buys ETFs, Corporate Bonds, and REITs. What's left: gold?
Instant View via Reuters:
HIROSHI SHIRAISHI, ECONOMIST, BNP PARIBAS
"The numbers are weak. Although the BOJ tankan indicated stronger (capital spending), uncertainty about the outlook for the overseas economy is making Japanese companies cautious. "Things won't be as strong as the tankan suggested. We didn't think capital spending would be that strong, because we can't expect much growth in overseas economies. "The pace of capital spending is gradually becoming weaker. "We believe that BOJ will loosen monetary policy (at Thursday's meeting)."
YASUO YAMAMOTO, SENIOR ECONOMIST, MIZUHO RESEARCH INSTITUTE IN TOKYO
"Looking at the May figure alone you may say that machinery orders were weak, but given that the data is volatile you cannot say capital spending is losing momentum. "Corporate capital spending remains in a moderate uptrend as the Bank of Japan's June tankan confirmed, although the pace is tepid and levels are below those seen before the Lehman crisis. "Public spending and personal consumption are driving the Japanese economy but economic growth is likely to slow after the summer partly as government subsidies for low-emission cars run out of money. You cannot expect much from exports given uncertainty over Europe and the global economy. "The BOJ is likely to sit tight this week given the current yen movements, but it could ease policy further as early as September if it becomes clearer that the economy is slowing down."
HIROAKI MUTO, SENIOR ECONOMIST, SUMITOMO MITSUI ASSET MANAGEMENT CO, TOKYO
"Machinery orders from both manufacturers and non-manufacturers fell a lot. External demand looks weak. A lot of companies have turned cautious about overseas economies. The global economy is weaker than we thought. "Machinery orders suggest capital expenditure is weaker than what companies indicated in the most recent Bank of Japan tankan survey. This suggests that capital expenditure plans in the tankan are likely to be downgraded. "The current account surplus took a hit from imports of liquefied natural gas. Prices for these imports should start to follow oil prices lower. "There are increasing worries for the Japanese economy. The BOJ looked like it would be on hold this week, but given weak U.S. economic data and monetary easing by central banks in China and Europe, there is now a 50 percent chance that the BOJ could ease this week."